As VARs and Managed Service Providers we live in a world of a $4 cup of coffee and Federal Express, but we cannot get paid adequately for our services to run truly successful businesses.  Why is that?

The MSP and VAR space is rife with questions critical to our success and profitability:

• At minimum, do we need a market price at least three times our delivery cost or we have a loser on our hands?
• Do your clients not perceive the need for your product or service? 
• Are you unable to make an adequate sales presentation on the value?
• How do you compute that value?
• Are you selling to the wrong person or the wrong client profile?
• Does your client suspect deep down that maybe you really can’t adequately deliver? 

These questions are at the heart of a peer driven tele-conference call December 19th, 2007 at 1 PM Pacific time.  Come and join other VARs and MSPs on tele-conference about Profit Salvation and the MSP Pricing Dilemma. The call-in number is 1-800-371-8200. Access code: 834287

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As your moderator on this call, here is my story that inspired this discussion.

I attended a small private briefing recently.  A well known book author was the breakfast guest.  He was talking about customer needs.  The whole time he was talking, he was holding a cup of Starbuck’s coffee.  The essence of his message was that clients don’t always know what they need.  He said focus groups and other such traditional vehicles for figuring out client needs can be helpful, but he also pointed out the process can be flawed and incomplete.  I kept waiting for the coffee cup punch line to get delivered and about half-way through his presentation he delivered.  He said “Ten years ago, customers did not know they wanted a four dollar cup of coffee” as he waved his Starbuck’s cup up high.  He then said, “30-years ago, no one knew they wanted to spend $12 to ship a letter overnight when they could mail it for eighteen cents.”

What does this mean for your VAR or MSP business? I thought about what he said and he was right.  I used to make regular morning stops at a Winchell’s donut shop regular many years back.  Paying fifty cents for a cup of coffee was considered normal.  To suggest that anyone would charge four dollars would have greeted with dubious questioning.  I also recalled stories about how Fred Smith of Federal Express got low marks from his professor on his MBA paper outlining the proposed business model.

Customers don’t always know what they want.  Packaged correctly, customers are willing to pay a premium for a service.

Why is it that we always think we are price pressured when selling product or services to our clientele?  Why do we fail to stay focused on the value of our service when pricing it?  Why can’t we charge premium rates for our “coffee?”

Notice how I speak to the value of the service and not the cost, as in cost to us.  For those of us with many years in the reseller space, the customary practice is to price up from the cost of a product.

Why don’t we charge rates based upon value to our client?  What do we need to do to change our ways?

The MSP and VAR space is rife with questions critical to our success and profitability:

At minimum, do we need a market price at least three times our delivery cost or we have a loser on our hands?

I am a huge proponent of value based pricing.  That is the approach of pricing the service based upon how much economic value or savings it provides your client.  How can we compute that value?

In many cases we need to understand our client’s problem better than they do.  We then need to be able to educate them on the nature of the problem and the financial impact or burden they face.  If we can make a strong presentation here, we have a real winner.  If we can do this over and over and over again, we have a successful business.  If we can’t, the harsh reality is that we have a loser and it is time to go back to the drawing board because somewhere we have a problem.

What is that problem?

Do the clients not perceive the need?

Are we unable to make an adequate sales presentation on the value?

Do our clients genuinely not have that need?

Are we selling to the wrong person or the wrong client profile?

Does our client suspect deep down that maybe we really can’t adequately deliver?

Join me and other VARs and MSPs on a tele-conference about Profit Salvation and the MSP Pricing Dilemma December 19th, 2007 at 1 PM Pacific time.  The Call-in number is 1-800-371-8200. Access code: 834287